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Pentagon Fraud

Friday, November 30, 2012

The Senate on Friday agreed to make the Pentagon compile annual reports on contracting fraud. The provision by Sen. Bernie Sanders was added to a Department of Defense authorization bill. Another Sanders amendment added to the bill today would make public a list of senior military officials who leave the government and land on the payrolls of defense contractors. “This country has a $16 trillion national debt. It is unacceptable that the Department of Defense continues to lose vast sums of taxpayer money because of fraud perpetrated by major defense contractors. This has got to stop,” Sanders said.

The contractor fraud provision would make the Department of Defense identify firms that received contracts after they were previously sanctioned for defrauding the Pentagon.

Over the past decade, the Department of Defense paid more than $400 billion to contractors who had been previously sanctioned in cases involving $1 million or more in fraud, according to a 2011 Pentagon report. That study, the first of its kind, was required by a Sanders amendment to an earlier defense authorization bill.

Major contractors among the many examples of fraud cited in the report included:

Lockheed Martin. The nation’s largest defense contractor landed $200 billion in taxpayer-funded contracts even after paying $60.95 million in fraud judgments and settlements over the previous 10 years. In 2008, for example, Lockheed paid $10.5 million to settle charges that it submitted false invoices for a multi-billion dollar contract connected to the Titan IV space launch vehicle program. The very next year, Lockheed received $30.2 billion in Pentagon contracts.

The Boeing Company. It paid at least $644 million in fraud judgments and settlements while it received more than $21 billion in contracts in the last decade. In 2000, for example, Boeing agreed to pay $54 million to settle charges that it placed defective gears in more than 140 Chinook helicopters and then sold the helicopters to the Army.

Northrop Grumman Corp. Despite paying at least $410 million in fraud judgments and settlements, the nation’s No. 3 defense contractor was awarded more than $9 billion in taxpayer-funded contracts in the last decade. In 2005, Northrop Grumman paid $62 million to settle charges that it concealed basic inventory problems. Despite the serious charges, Northrop Grumman received $12.7 billion in contracts the next year, a 16 percent increase over the year before.

Under a separate Sanders amendment, the Pentagon would have to shed light on defense contractors that hire retiring Pentagon brass to help them land lucrative government contracts.

A recent study by Citizens for Responsibility and Ethics in Washington and the Brave New Foundation found that 70 percent of recently-retired three-and-four star generals left the Pentagon for employment by major defense contractors. At least two of the former generals continued to serve on Defense Department advisory panels. The report did not find that any generals were breaking rules, but said that ethics codes are “riddled with loopholes” and suggested increased public scrutiny could prevent conflicts of interest.